China picks owners for 5 new private banks

BEIJING — Ten companies including Internet giants Alibaba and Tencent have been picked to invest in China’s first five privately owned banks, the industry’s chief regulator said Tuesday.

The planned banks, part of sweeping reform plans announced last year, will be expected to operate independently and according to market principles, said Shang Fulin, chairman of the China Banking Regulatory Commission. He gave no timetable for when they would open or details of their intended size.

Regulators announced last year Beijing would allow the creation of privately financed banks as part of efforts to make the economy more productive by giving market forces a bigger role.

An overhaul of the state-dominated financial system is expected to be the core of what the ruling Communist Party bills as the most ambitious economic changes since the launch of market-style reform in 1979.

Reform advocates complain state banks hold back the economy by lending mostly to state industry, rather than to entrepreneurs who create its new jobs and wealth. Interest paid on savings is low, effectively forcing Chinese households to subsidize politically favored borrowers.

Each new bank must have at least two private investors, Shang said at a news conference held during the annual meeting of China’s legislature. He said preparatory work still was underway.